Third stimulus check: do children born in 2021 count? – Community News
Stimulus Check

Third stimulus check: do children born in 2021 count?

The US bailout plan, the $1.9 trillion covid-19 relief bill passed by Democrats in March, will bring an extra bit of joy to newborn parents, a $1,400 tax credit when they file their 2022 income tax return. Eligible Americans are already starting to see instant incentive payments in their bank accounts with the IRS releases the first wave of payments on March 17.

While the third round of economic impact payments was more targeted than the previous two rounds, Americans who earn up to $75,000 annually and couples who earn up to $150,000 will receive the full $1,400 per person, including children. Individuals and couples earning above that amount can receive a partial payment, but the phase-out limit is much lower than before, with maximum payments for individuals earning $80,000 and couples earning $160,000.

How do I claim the $1,400 for my newborn?

Similar to the CARES Act and the Covid-19 Relief Act passed in December, which in 2020 included a provision for parents of newborns to collect an incentive payment for their baby, anyone who gives birth in 2021 can receive an additional $1,400 check for their baby. Parents of newborn children in 2021 will have to wait for them to file their income tax return in 2022 to get the payment of $1,400 for their child.

For those filing their tax returns this year, they can use the Recovery Rebate Credit to claim any unpaid incentive money from previous EIP rounds. New parents in 2021 can expect to do the same in 2022, but there are additional provisions in the US bailout plan that parents can take advantage of. The legislation also provides for improved child tax relief for parents with children for the 2021 tax year.

Extended tax credit for children

Due to the provision in the Covid-19 bill, the number of households that are eligible for the child discount is increasing. The current income floor at which a family has to earning a minimum of $2,500 per year to even qualify for the 2021 child tax credit has been removed. The bill sets a limit for receiving the maximum amount at $75,000 per year adjusted gross income (AGI) for individual taxpayers, $150,000 for joint filers and $112,500 for head of the household. Above that threshold, the benefit is gradually phased out.

The following applies to families below the income limit: can get a tax credit for the full $3,600 per child under 6 and/or $3,000 per child under 18. Under the American Rescue Plan Act, half of the amount must be paid out in direct payments, similar to how the $1,400 incentive plan is in the same account. According to the provision, payments must be made monthly from July 1 to December. The rest, $1,800/$1,500, would be available to families as a discount when they file their 2021 income tax returns in 2022.

Payments can be made at longer intervals, it is up to the Chancellor of the Exchequer, Janet Yellen, to determine if monthly payments are feasible for the IRS. However, families can also choose to receive the credits in one go when filing their income tax return in 2022. The agency will also be tasked with setting up an online portal to enable families to change their status if their financial or family situation changes.